Hospitals are integrating with physicians in ways other than, and in addition to, employment. A “co-management” arrangement is a form of integration that does not require employment and that can be used to further integration with employed physicians.

A co-management arrangement arises when a hospital engages physicians to assist the hospital to manage some of its business. A typical arrangement involves the engagement of specialists to “co-manage” a hospital’s related service line. For example, a hospital might engage gastroenterologists to assist the hospital to manage its entire digestive disease service line.

The management services that physicians provide do not typically duplicate services that the hospital’s existing staff provides. Instead, the management services often concern high-level matters that are directly within physicians’ expertise. For example, a co-management arrangement will nearly always involve/incorporate all of the medical directorship duties/positions that individual physicians would otherwise provide. Other typical responsibilities include managing operating room or cath lab scheduling, developing specialty-specific protocols for admitted patients, and establishing specific inpatient and outpatient quality and efficiency objectives and implementing plans to achieve them.

The “co-” portion of “co-management” recognizes that at some level the management is a joint effort between the hospital and the physicians. There are several areas of potential connection. First, hospital representatives nearly always participate in the management decision-making process. The legal entity that provides the co-management services typically has an executive board, quality committee, and operations committee. Hospital representatives would participate (in a minority role) on each. Second, changes in hospital practices that result from the management services are nearly always subject to a hospital-established budget and other hospital-governed financial parameters. This control arises in part because of rules that require tax-exempt entities to control their operations. Third, sometimes (though not often) a hospital is a member of a joint venture with physicians that provides the management services.

Co-management arrangements can benefit physicians by permitting them to integrate with their preferred hospital to improve that hospital’s quality and efficiency in the specific areas that matter to the physicians. Another potential benefit of these arrangements is that they do not necessarily require the physicians to be employed by the hospitals. As a result, some independent physician groups view co-management as a means to test drive whether working with a hospital is to their liking.

From the hospital perspective, service line management by a select group of dedicated independent community physicians could be, in theory, as effective as management by hospital-employed physicians. The difficult part can be to determine what standards should apply to determine when a physician is sufficiently “dedicated” to that hospital’s operations to permit that physician to participate in its management. Because management opportunities involve compensation, a physician’s level of referrals to the hospital is not a prudent measure of “dedication.” Physicians that a hospital employs full time are always considered sufficiently dedicated to participate in co-management arrangements.

My next article will address some of the ways that co-management entities are structured, how physician members are selected, and some of the typical methods that hospitals use to determine the compensation to pay for co-management services.

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Practice Notes is a space for commentary and news on practice management and healthcare policy. Opinions expressed by guest bloggers are their own, and do not necessarily reflect the views of Physicians Practice, its staff or editors, or that of its parent company, UBM Medica.